Microsoft's China plan: Trading jobs for piracy protection

The press release may not read this way, but Microsoft (MSFT) is trading jobs in the Chinese city of Hangzhou for protection against the piracy of its software. Over the years, the world's largest software company has almost certainly lost billions of dollars on pirated copies of its Windows software.

Microsoft will build a new tech center in the city, which will provide jobs for a large number of skilled Chinese engineers. Under most circumstances, a U.S. company would do this to have access to a well-trained, inexpensive labor force. Microsoft, however, has held out for a great deal more than that.

According toThe Wall Street Journal, "The aim is to establish a model city where intellectual property rights have greater protections than elsewhere in China."

China is a huge country in terms of both population and physical size. An attempt to crack down on piracy in one city will barely make a dent in the piracy problem nationwide. That is unless, of course, Microsoft is willing to open hundreds of facilities in every major city and province.